Now, a year after the Clean Energy Agreement was announced, the PUC has issued an interim order ruling that there will be a feed-in tariff in Hawaii. The Hawaiian Electric Co.'s Robbie Alm and many others say this is bold step forward, but the final order is still months away. What should we expect, and how can we make it work?

INTERIM ORDER

Once finalized, the FIT will require the utility to buy power from renewable producers using standardized 20-year contracts, with rates set in advance. This process will avoid the long negotiations usually required for a producer to get a Power Purchase Agreement from the utility, and should be a huge incentive for energy development.

There are limits. The FIT will only apply to facilities of up to 5 megawatts on Oahu and 2.7 megawatts on Maui and the Big Island. For the first two years, the FIT program will be limited to 5 percent of peak capacity, a limit that would now be 80 megawatts for the three HECO companies. After two years, the PUC would see if these limits should be expanded. There's also a provision that would allow HECO to unilaterally curtail power from producers. Some say this could make it more difficult to finance these projects.

PRICE IS EVERYTHING

The PUC still needs to settle the rates to be paid to FIT producers, and that could be a big issue.

For the FIT to work, rates need to be high enough to incentivize renewable energy developers to invest. These rates will probably exceed the cost of generating power but will save money by fixing a price that will be level over the 20-year contract. It will also help us reach our energy goals.

During the first two years, the FIT will cover photovoltaic, wind, concentrating solar power and inline hydro. Their respective rates may differ, reflecting differences in development costs and resulting benefits to the overall system.

There are already state and federal tax incentives for installation of solar, wind and other renewables. As oil goes higher and renewable technologies get more efficient, we can expect fewer tax incentives. But a properly priced FIT is a powerful incentive in its own right.

OPENING NEW DOORS

The FIT will go beyond current net metering, but won't replace it. If you're producing only for yourself, you're better off with net metering — you never pay more than the going rate and the economics are never worse than a wash. Under a FIT contract, you become part of the energy industry, with all its concomitant risks and rewards.

This could lead to a new player on the field — the Everyman Energy Developer. If done right, it could mean a proliferation of renewable projects all around the state all contributing to the grid in a broad based democratization of the renewables industry.

The term Energy Developer has a ring to it. It sounds like a great career for Hawaii's entrepreneurs, and an appealing successor to real estate development. We can only hope there will be many new entrants and that the real estate regulars won't dominate.

WHEN'S THE PARTY?

Although Gov. Linda Lingle claims that her energy initiative is well under way, not a whole lot has actually happened since she announced it a year ago.

There's still no wind in Oahu. Biofuel on Kauai is way off. The Maui algae plant isn't happening yet. Geothermal is under constraint. Have you seen an electric vehicle or charging station? If you cast about looking for progress, you find fossil is still king.

All in all, the FIT gives great breakthrough with promising implications. Now that the PUC has ordered it, let's get it finalized on the fast track originally intended. And then let's watch and carefully adjust it going forward. As always, the price of success is eternal vigilance.

Thanks to Mark Duda of Distributed Energy Partners for his help. See his video at www.ThinkTechHawaii.com.

Jay Fidell is a business lawyer practicing in Honolulu. He has followed tech and tech policy closely and is a founder of ThinkTech Hawaii. Check out his blog at www.HonoluluAdvertiser.com/Blogs.